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Why SACCOs are opposed to changes in cooperatives law

Fear of losing control and ownership is the main reason behind opposition to amendments to the co-operative law affecting 22,000 unions and societies with an asset base of Sh780 billion.

Irate SACCO members say the intention of the changes is to “sneak” members into societies with the aim of gaining from their sweat.

They have also taken issue with the lack of a face (sponsor) behind the proposed amendments, saying they touch on the lives of millions of people.

Changes are proposed to the Co-operative Societies Act and the Sacco Societies Act by the Statute Law (Miscellaneous Amendments) Bill, 2018 (National Assembly Bill No 12 of 2018) (the SLMA bill).

They touch on membership, voting rights and investment decisions for societies.

They also propose that Section 17 of the Co-operative Societies Act be amended by making the existing provision to be sub-section (1) and introducing three new subsections.

The reforms will allow, by way of an ordinary resolution approved by the Cabinet secretary, creation of a class of members to be referred to as “social impact members”. These shall not be subject to the primary and normal requirement that each member has to subscribe and purchase a given number of shares to be admitted into membership of a co-operative.

In further amendments, social impact members will enjoy the right to attend and participate in decisions taken in a general meeting of the society and to vote. They will also have the privilege of being elected into organs of the society.

On Friday, the national leadership of Kenya’s co-operatives in a consultative forum rejected the proposed amendments and accordingly advised that the so-called social impact members form their own society and run it as they wish.

The Co-operative Alliance of Kenya (CAK), an umbrella lobby for the 15 million-member-strong co-operative movement in Kenya, in a letter to the clerk of the National Assembly and the Attorney-General warned that the proposed amendments will breach the long-standing policy and tradition of equality of membership that has guided saccos and made them thrive.

“Once a person is admitted into membership of a co-operative society, he ranks equal with other members in respect to fundamental issues such as the minimum number of shares he subscribes to and pays for (and) one vote irrespective of shares held and interest in the society,” said CAK Executive Director Daniel Marube.

“These proposed amendments, to say the least, have the purport and intent to sneak strangers into the room, who not only come to scavenge on the goodwill and institutional set-up of sacco societies, but also to attack and wreck the foundation upon which saccos are built,” he warned.

“These are not miscellaneous amendments but are major changes. We do not want those amendments because there have been no consultations,” Mr Marube said at the ADM held at Laico Regency yesterday morning.

The Kenya Union of Savings and Credit Cooperatives Ltd (Kuscco) Managing Director George Ototo said: “We will use all means to make sure the proposed changes do not go through.”

He said if the bill is passed into law in its current state, then Kuscco will go to court, and added that they believe the court will rule in their favour.

The bill also proposes the establishment of a Special Fund whose sole source are monies received from social impact members. The investment committee determines the amounts to be contributed by social impact members.

Mr Marube poured cold water on this proposal, saying to create the special investment committee, advisory board and the special fund trustee is akin to creating “a parallel management framework in a sacco and allowing them to operate independent of each other without giving regard to interplay with the existing institutional regulatory framework.”

The purpose of the fund, according to the bill, is “to extend credit to eligible persons to invest in start-ups and early stage financing of their ventures”, and for remunerating the special fund trustee.

It is especially this proposal to use saccos as a launching pad for financing external ventures, which effectively converts them into venture capital funds, that is most intriguing to co-operative leaders.

Lending to non-members would break the core character and identity of saccos with suspicions that such attempts would open their assets to plunder though underwriting of dodgy loans to risky external ventures.

It is also most curious to the movement, they argue, that no politician has come forward as the sponsor of the bill despite the huge potential for political mileage that a law that touches ton the livelihoods of millions of households would attract.

“Who is this that wants to sneak in major amendments to laws that would have far-reaching ramifications on Africa’s largest co-operative system?” Mr Marube asked.

Co-operatives leaders sum it all by wondering who the actual proponents of the bill are and what their motives could be, for the reason that even the parent ministry responsible for co-operatives and the sacco regulator Sasra have openly said they did not initiate nor were they consulted.

“Who wants to make a backdoor and illegal entry into the co-operative sector by riding on the SLMA bill? Who wants to profit and make capital out of the hard-earned savings built in the co-operative sector over a long period?” Mr Marube posed.

There are over 22,000 registered co-operative societies in Kenya, with over 15 million members, making it Africa’s largest co-operative movement. The co-operative sector is active in many sectors of the economy.

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